TOCALO : Supplementary Briefing Material of Financial Results for the Second Quarter Ended September 30, 2023

(TSE Prime Market Code 3433)

New possibilities for a bright future

Financial Summary (1H FY2023)

11/8/2023

Kazuya Kobayashi

Representative Director, President and Executive Officer

President's Greeting and Introduction

1989: Joined TOCALO Co., Ltd.

Worked in the Tokyo Plant's Production Div. for 4 years

1993: Worked in the Thermal Spraying Technology R&D Laboratories

2004: Worked in the Akashi Plant Launched large FPC production plant

2009: Kitakyushu Plant Assistant Division Manager of Production (Plant General Manager in 2014)

Launched business with overseas semiconductor equipment manufacturers

2018: General Manager of Akashi Plant

2021: Managing Executive Officer and

General Manager of Production Headquarters

2023: Assumed position of Representative Director, President, and

Executive Officer	2
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President's Greeting and Introduction

To actively promote the medium-term management plan:

Safety is our top priority

• Creating a safe workplace (JISQ45100 certification)
• Creating a clean, functional, and people-friendly workplace

Manufacturing with sincerity

• Complying with work procedures and fulfilling customer quality standards
• Each and every employee works with a sense of responsibility for their own work

Thorough improvements to production efficiency

• Aiming to further improve thermal spray efficiency
• Increasing production efficiency by automating production systems

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Content

1. Overview of Consolidated Results 1H FY2023
2. Consolidated Forecast FY2024
3. Progress of Medium-term Management Plan

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1. Overview of Consolidated Results 1H FY2023

Highlights of Consolidated Results 1H FY2023

Net sales decreased for the first time in P O I NT nine half-years due to a decline in the

semiconductor field

Net Sales	Change
-4.9％

Net Sales (JPY Million)

Operating Profit Ratio

23,996	24,147	22,971
22,714

Ordinary profit decreased by 7.6% from the P O I NT previous half year, but exceeded the initial

forecast

	Change
Ordinary Profit	-7.6％

Ordinary Profit (JPY Million)

Ordinary Profit Ratio

6,033

5,222 5,349

21,098

4,970

4,590

24.2% 22.6% 23.3%

20.6% 18.7%

24.8% 23.5% 25.1%

20.6% 20.0%

FY2021	FY2021	FY2022	FY2022	FY2023
1H	2H	1H	2H	1H

FY2021	FY2021	FY2022	FY2022	FY2023
1H	2H	1H	2H	1H

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Overview of Consolidated Results 1H FY2023

While the semiconductor field was very strong in the first half of the previous year,

• Net sales decreased by 4.3% year-on-year due to the semiconductor market entering an adjustment phase
• Ordinary profit decreased by 23.9% year-on-year due to a change in the sales mix and an increase in personnel costs and R&D expenses, etc.

(JPY Million)		1H FY2022	1H FY2023	Change
	Result		Ratio	Result	Ratio	Amount	%
Net Sales		23,996		100.0%	22,971	100.0%	-1,025		-4.3%
Operating Profit	5,581	23.3%	4,295	18.7%	-1,285		-23.0%
Ordinary Profit		6,033		25.1%	4,590	20.0%	-1,442		-23.9%
Net Income Attributed to	3,919	16.3%	2,985	13.0%	-933		-23.8%
Owners of Parent
Earnings Per Share (EPS)		64.45JPY		ー	49.42JPY	ー	-15.03JPY	ー

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Analysis of Ordinary P/L Change

■ Decreased orders for Thermal Spray	■ Increase in outsourced processing costs, etc.	■ YoY decrease in boosted profits
■ Partially compensated for by increased sale price	■ Changes in sales composition	due to yen depreciation
	(decrease in Semiconductor & FPD fields)

Sales
decrease	Variable
	cost ratio
	increase	Labor costs
-661		Depreciation	Exchange
	increase
			decrease	effect	Other
	-515

-158 +166

(JPY Million)

■ Implemented wag increases

6,033	■ Increase in full-time
employees
	■ Reduced overtime work

• No major changes in the capital investment plan for the current fiscal year

• Decreased inventory write-downs
• Increased electricity costs
• Increased R&D costs

4,590

- 1,442 Million JPY

-23.9％

1H FY2022	1H FY2023
Ordinary Profit	Ordinary Profit

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1H FY2023 Net Sales (by Segment)

• Thermal Spray (TOCALO), the largest segment, decreased due to a decline in the Semiconductor & FPD field
• Other segments performed well, including other surface modifications, where demand for agricultural machinery parts increased

(JPY Million)		1H FY2022	1H FY2023	Change
	Result		Ratio	Result	Ratio	Amount	%
Net Sales		23,996		100.0%	22,971	100.0%	-1,025	-4.3%
■ Thermal Spray (TOCALO)	18,205	75.9%	16,748	72.9%	-1,456	-8.0%
Semicon & FPD	12,100	50.4%	9,737	42.4%	-2,363	-19.5%
Industrial Parts	1,739	7.2%	2,224	9.7%	485	27.9%
Iron & Steel	1,775	7.4%	1,746	7.6%	-29	-1.6%
Others	2,588	10.9%	3,039	13.2%	450	17.4%
■ Other Surface Modif.	1,367	5.6%	1,515	6.6%	148	10.8%
■ Domestic Sub.	1,197	5.0%	1,230	5.4%	32	2.8%
■ Overseas Sub.	3,140	13.1%	3,422	14.9%	282	9.0%
Royalty Income	86	0.4%	54	0.2%	-32	-37.3%

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1H FY2023 Consolidated Results by Segment

Thermal Spray (TOCALO)

Although industrial machinery and other segments performed well, sales and income decreased due to a decline in the semiconductor and FPD fields

YoY Change Ratio Net Sales	-8.0％
Segment Profit	-28.9％

Net Sales (JPY Million)

Segment Profit (JPY Million)

Segment Profit Ratio

18.9%

24.5%

18,20516,748

4,4633,171

1H FY2022

1H FY2023

Domestic Sub.

Orders related to cutting tools are on a recovery trend due to an improvement in automobile production, resulting in increased sales and income

YoY Change Ratio Net Sales	+2.8％
	Segment Profit	+62.6％
	Net Sales (JPY Million)
	Segment Profit (JPY Million)	23.2%
	Segment Profit Ratio

14.6%

	1,197	1,230
	175	284
	1H FY2022	1H FY2023

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